Buying a home is the biggest purchase most of us will make in our lifetime.

Because of that, it is also the most demanding purchase in terms of preparation.

Read on for three tips on what you’ll need to secure your home for life.

Tips for all types

Whether you’re a first-time buyer attempting to navigate the minefield that is mortgage applications and preparation, or it has been years since you last underwent a mortgage transaction, it’s useful to familiarize yourself with all aspects of a mortgage application.  

Chances are you are in the former category.

Obviously, lenders are an integral part of the process, and what they are looking for is perhaps the most important part of it.

In the following paragraphs, we will go over the things they look for when they review a mortgage application.

Tip 1: Have the cash

 You will need some spare cash saved up to buy a home.

Coming up with it yourself isn’t always easy.

Unless you have been in a well-paying job for several years, it is unlikely you will have been able to save up the adequate amount of money.

In this age of ballooning house prices, it is becoming more and more common for people to borrow money from their parents for the mortgage.

In this case, you apply for a gift letter from your lender.

This is a correspondence between you, your lender, and the person giving you the gift.

Be it parents, grandparents, long-lost billionaire relatives, or just a rich friend.

It is not as simple as it sounds.

Sure, you could just get the money from somewhere and then use it for the down payment.

However, mortgage lenders need to be assured that that money is yours and not a loan with stringent conditions.

Whether it’s a gift, or a loan, it’s incredibly important to your credit status, and there is much documentation needed and rules to follow to prove it is just that.

And remember to tell the lender the total amount of the down payment gift when it comes up, rather than the percentage of the whole mortgage it constitutes.

Let them worry about the percentages.

Tip 2: Have the income

You will need a decent income to get almost any type of mortgages.

 The only exception to this is a reverse mortgage, which is an option open to retirees, but we’ll park that for this conversation.

Other options include asset-depletion programs used by some lenders.

This is for people with large assets or savings who don’t want the mortgage to be based on their income.

In this scenario, income is drawn from said assets to finance the home.

But most people don’t choose this option.

You’ll still need an income to offset the payment and keep debts low, to allow room for the mortgage payment.  

Tip 3: Have a good credit status

This is also incredibly important.

If your credit score isn’t good enough, you won’t be able to secure a mortgage.

By good enough, we mean a credit score of 620 or more.

See the chart below for where different scores lie in the eyes of lenders.

So if you find yourself in the 620 and above range, average or above, you’re in the clear and are in business.

You can get mortgages if you are in the under 620 range, as we saw with the subprime mortgage crisis of 2007.

While lenders have become more prudent since then, risky lending still happens.

Your debt-to-income ratio could help you if you are one of these cases, and many banks may require a maximum ratio, say of around 40%, for you to qualify.

Secure your mortgage

If you match only two or one out of the above three criteria, your chances of getting a mortgage will be seriously diminished.

If you have the cash and income but not the credit score, lenders will be less likely to trust you to pay the loan back.

If you have the cash and credit score but no fixed income, the lender will doubt your ability to keep up with payments and will advise you get fixed income job.

If you have the latter two but no cash, you will not be able to afford the down payment.

And you can’t hide these from lenders.

They will scrutinize you from every angle as that is how they make their living.

Get focused on filling all the criteria so that your mortgage application can go smoothly.